Wednesday, 21 March 2012

The Budget - more stupidity

I am humiliated: despite intense lobbying by this blog and many others, George Osborne hasn't taken a blind bit of notice. According to the BBC website, "duty on all tobacco products to rise by 5% above inflation from 18:00 today - the equivalent of 37p on a packet of cigarettes. No change to existing plans on alcohol duty - meaning the duty will rise 2% above the rate of inflation, putting more than 5p on the price of a pint."

Frankly, I don't think anyone is very surprised, but if the Coalition tries to claim they can't afford to cut beer duty, or at least freeze it, for financial reasons, then they will be lying, because even some in the Treasury are realising that increases on beer and cigarette duty are increasingly self-defeating and will raise little or nothing. Many people will simply spend the same money buying less, so no tax gain there; some may stop going out altogether. By making the smuggling of alcohol and cigarettes more profitable, the amount lost to the Treasury will continue to escalate, while giving our pubs an increasingly hard time, resulting in closed small businesses and lost jobs. None of this makes any economic sense.

Politicians whom I don't agree with are one thing; politicians who are incredibly stupid, as this lot are, are an insult to our intelligence. There are many more reasons to despise this budget, but I've kept within the remit of my blog here. Please sign the beer tax escalator petition to the right if you haven't done so already.

Of course it's an assertion - you get a lot of those on blogs - but if you Google "beer tax increases self-defeating" or "beer tax increases unproductive", you'll find a lot of people agree with me. The Treasury has produced estimates as to how much it loses due to smuggling (£800 million for alcohol alone); it's reasonable to conclude that if you make smuggling more profitable by increasing taxes, more people will do it, especially as it's so easy. But even without smuggling, it's clear that tax increases are reducing how much people are spending in pubs, and if drinkers spend less, it's not easy to see how the Treasury can get more.

You ask: "Where is the evidence that lowering beer tax increases the tax take?" No idea, but then that's not what I argued for, which was an end to the beer tax escalator, i.e. against automatic increases at 2% above inflation, which isn't the same thing at all.

I accept that you prefer an increased personal allowance to 10p on or off a pint, but that suggests it's a simple choice between those two alone, but it’s not: cuts in tax for rich people, the fortune being squandered on unnecessary NHS changes, the cost of wars and weapons of mass destruction, the bottomless well that is the Olympics, are just a few examples to show that government income and expenditure is rather more complicated than a choice between one tax and another.

In fact, wage freezes/cuts at a time of inflation mean there are two serious pressures driving many people's spending power down. The tax escalator adds a third for drinkers. Taking all that together, unless a drinker has a job with an inflation-proofed salary, the increases in tax allowances are unlikely to compensate for the spending power he or she is losing. But as you're not really a pub goer, the price in pubs is of less concern to you.

As for your final sentence, that's merely stating the obvious and applies to most of us: I made it clear in my final paragraph that I was looking at the budget from the limited perspective of the remit I have set for this blog. I assure you there is a lot more about this budget I could complain about.

I know you said that, but I doubt anyone seriously expected that the escalator would be discontinued this budget. I also noticed you saying on your own blog that it is important to register your disagreement, which is more or less my view, and to that end we both encouraged people to sign the petition to government, because otherwise government would view lack of opposition as agreement. I don't have a grand plan up my sleeve - I wish I did.